“We delivered a 17.3% increase in revenue for the fourth quarter, along with our fourth sequential quarter of positive Adjusted EBITDA and a significant improvement in our bottom line Adjusted EBITDA for the year of over $900 thousand,” said Ari Kahn, Bridgeline’s President and Chief Executive Officer. “Our financial improvements derive not only from stronger customer acquisition but also from expansion within our existing customer base where our customers found new opportunities to grow their business with Bridgeline’s latest products and services. In fiscal 2017, we were selected by Fortune 500 companies and large multi-national businesses that have even greater growth potential for the upcoming year.”

Fourth Quarter Highlights:

Total revenue increased 13.7% to $4.2 million in the fourth quarter of fiscal 2017, compared to $3.7 million in the fourth quarter of fiscal 2016.

Subscription and perpetual license revenue increased 17.3% to $1.8 million in the fourth quarter of fiscal 2017, compared to $1.5 million in the fourth quarter of fiscal 2016.

Services revenue increased 15.2% to $2.2 million in the fourth quarter of fiscal 2017, compared to $1.9 million in the fourth quarter of fiscal 2016.

iAPPS SaaS revenue increased 6.1% to $1.4 million in the fourth quarter of fiscal 2017, compared to $1.3 million in the fourth quarter of fiscal 2016.

iAPPS recurring revenue increased 5.7% to $1.8 million in the fourth quarter of fiscal 2017, compared to $1.7 million in the fourth quarter of fiscal 2016.

Operating expenses were reduced by $404 thousand, or 13.6% to $2.6 million in the fourth quarter of fiscal 2017, from $3.0 million in the fourth quarter of fiscal 2016.

Net loss improved by $3.1 million, from a net loss of $3.4 million in the fourth quarter of fiscal 2016 to $332 thousand in the fourth quarter of fiscal 2017. The fourth quarter of fiscal 2016 included a non-cash charge of $2.7 million related to the inducement of convertible notes.

Adjusted EBITDA improved by $341 thousand, to $41 thousand in the fourth quarter of fiscal 2017, from a loss of $300 thousand in the fourth quarter of fiscal 2016. This was the fourth sequential quarter of positive Adjusted EBITDA.

Year to Date Highlights

Total revenue for the year increased 2.5% to $16.3 million in fiscal 2017, compared to $15.9 million in fiscal 2016.

Subscription and perpetual license revenue for the year increased 11.6% to $6.8 million in fiscal 2017, compared to $6.1 million in fiscal 2016.

Total SaaS revenue for the year increased 6.6% to $5.5 million in fiscal 2017, compared to $5.2 million in fiscal 2016. iAPPS SaaS revenue for the year increased 16.0% to $5.5 million in fiscal 2017, compared to $4.7 million in fiscal 2016.

iAPPS recurring revenue increased 8.8% to $7.0 million in fiscal 2017, compared to $6.4 million in fiscal 2016.

Gross margin for the year improved to 56.1% in fiscal 2017, from 54.2% in fiscal 2016. Cost of revenue for the year was reduced by $122 thousand, or 1.7% to $7.2 million in fiscal 2017, from $7.3 million in fiscal 2016.

Operating expenses for the year were reduced by $1.6 million, or 13.5% to $10.5 million in fiscal 2017, from $12.2 million in fiscal 2016.

Net loss for the year improved by $6.2 million, from a net loss of $7.8 million in fiscal 2016 to $1.6 million in fiscal 2017.

Adjusted EBITDA for the year improved by $907 thousand to $122 thousand in fiscal 2017, from a loss of $785 thousand in fiscal 2016.

Financial Results

Fourth Quarter

Revenue for the fourth quarter of fiscal 2017 increased 13.7% to $4.2 million, from $3.7 million in the fourth quarter of fiscal 2016. Services revenue increased 15.2% to $2.2 million in the fourth quarter of fiscal 2017, from $1.9 million in the fourth quarter of fiscal 2016. SaaS revenue increased 1.9% to $1.4 million in the fourth quarter of fiscal 2017, from $1.3 million in the fourth quarter of fiscal 2016. Subscription and perpetual license revenue increased 17.3% to $1.8 million in the fourth quarter of fiscal 2017, from $1.5 million in the fourth quarter of fiscal 2016. License and hosting revenue combined in the fourth quarter of fiscal 2017 comprised 48.0% of total revenue, compared to 48.7% of total revenue in the fourth quarter of fiscal 2016.

Gross margin was 54.8% in the fourth quarter of fiscal 2017, compared to 59.3% in the fourth quarter of fiscal 2016. Cost of revenue increased by $398 thousand, or 26.3%, to $1.9 million in the fourth quarter of fiscal 2017, compared to $1.5 million in the fourth quarter of fiscal 2016.

Operating expenses were reduced by $404,000, or 13.6% to $2.6 million in the fourth quarter of fiscal 2017, compared to $3.0 million in the fourth quarter of fiscal 2016, reflecting management’s ongoing expense control initiatives. Loss from Operations was $250 thousand in the fourth quarter of fiscal 2017, compared to $766 thousand in the fourth quarter of fiscal 2016.

Net loss was $332 thousand in the fourth quarter of fiscal 2017, compared to a net loss of $3.4 million in the fourth quarter of fiscal 2016. In the fourth quarter of fiscal 2016, we recorded a non-cash charge of $2.7 million related to the inducement of convertible notes. Excluding the non-cash charge of $2.7 million, our net income improved $419 thousand from the fourth quarter of fiscal 2016 to the fourth quarter of fiscal 2017.

Adjusted EBITDA improved by $341 thousand to $41 thousand in the fourth quarter of fiscal 2017, compared to a loss of $300 thousand in the fourth quarter of fiscal 2016.

Year to Date

Total revenue for the year increased 2.5% to $16.3 million, compared to $15.9 million in fiscal 2016. Subscription and perpetual license revenue for the year increased 11.6% to $6.8 million in fiscal 2017, compared to $6.1 million in fiscal 2016. SaaS revenue for the year increased 6.6% to $5.5 million in fiscal 2017, compared to $5.2 million in fiscal 2016. License and hosting revenue combined for the year comprised 47.8% of total revenue in fiscal 2017, compared to 46.4% of total revenue in fiscal 2016.

Gross margin for the year improved to 56.1% in fiscal 2017, from 54.2% in fiscal 2016, reflecting a larger mix of recurring revenue as well as an improvement in our resource utilization and services gross margin. Cost of revenue for the year was reduced by $122 thousand, or 1.7%, to $7.2 million in fiscal 2017, compared to $7.3 million in fiscal 2016.

Operating expenses for the year were reduced by $1.6 million, or 13.6% to $10.5 million in fiscal 2017, compared to $12.2 million in fiscal 2016, reflecting management’s ongoing expense control initiatives. Loss from Operations for the year was $1.4 million in fiscal 2017, compared to $3.5 million in fiscal 2016.

Net loss for the year was $1.6 million in fiscal 2017, compared to a net loss of $7.8 million in fiscal 2016, which includes a non-cash charge of $3.4 million related to the inducement of convertible notes. Excluding the non-cash charge of $3.4 million, our net income improved $2.8 million from fiscal 2016 to fiscal 2017.

Adjusted EBITDA for the year was $122 thousand in fiscal 2017, compared to a loss of $785 thousand in fiscal 2016.

Financial Outlook

For fiscal 2018, the Company expects revenue to be higher than the $16.3 million that was reported for fiscal 2017, and management expects to generate positive Adjusted EBITDA for full year fiscal 2018.

Conference Call Information

Bridgeline Digital will host a conference call to discuss fourth quarter 2017 results at 4:30 p.m. ET today. To listen to the conference call, please dial (877) 837-3910 within the U.S. or (973) 796-5077 for international callers.

Adjusted EBITDA and Adjusted EBITDA per diluted share are defined as earnings before interest and charges on conversion of debt, taxes, depreciation and amortization, stock-based compensation charges, restructuring charges, preferred stock dividends and any related tax effects. Bridgeline uses non-GAAP adjusted net income/(loss) and Adjusted EBITDA as supplemental measures of our performance that are not required by, or presented in accordance with, accounting principles generally accepted in the United States (“GAAP”).

Bridgeline’s management does not consider these non-GAAP measures in isolation or as an alternative to financial measures determined in accordance with GAAP. The principal limitation of these non-GAAP financial measures is that they exclude significant expenses and income that are required by GAAP to be recorded in the Company's financial statements. In addition, they are subject to inherent limitations as they reflect the exercise of judgments by management about which expenses and income are excluded or included in determining these non-GAAP financial measures. In order to compensate for these limitations, Bridgeline management presents non-GAAP financial measures in connection with GAAP results. Bridgeline urges investors to review the reconciliation of its non-GAAP financial measures to the comparable GAAP financial measures, which is included in this press release, and not to rely on any single financial measure to evaluate Bridgeline's financial performance.

Our definitions of non-GAAP adjusted net income/(loss) and Adjusted EBITDA may differ from and therefore may not be comparable with similarly titled measures used by other companies, thereby limiting their usefulness as comparative measures. As a result of the limitations that non-GAAP adjusted net income and Adjusted EBITDA have as an analytical tool, investors should not consider them in isolation, or as a substitute for analysis of our operating results as reported under GAAP.

All statements included in this press release, other than statements or characterizations of historical fact, are forward-looking statements. These forward-looking statements are based on our current expectations, estimates and projections about our industry, management's beliefs, and certain assumptions made by us, all of which are subject to change. Forward-looking statements can often be identified by words such as "anticipates," "expects," "intends," "plans," "predicts," "believes," "seeks," "estimates," "may," "will," "should," "would," "could," "potential," "continue," "ongoing," or similar expressions, and variations or negatives of these words. These forward-looking statements are not guarantees of future results and are subject to risks, uncertainties and assumptions, including, but not limited to, the impact of the weakness in the U.S. and international economies on our business, our inability to manage our future growth effectively or profitably, fluctuations in our revenue and quarterly results, our license renewal rate, the impact of competition and our ability to maintain margins or market share, the limited market for our common stock, the volatility of the market price of our common stock, the ability to maintain our listing on the NASDAQ Capital market, the ability to raise capital, the performance of our products, our ability to respond to rapidly evolving technology and customer requirements, our ability to protect our proprietary technology, the security of our software, our dependence on our management team and key personnel, our ability to hire and retain future key personnel, or our ability to maintain an effective system of internal controls as well as other risks described in our filings with the Securities and Exchange Commission. Any of such risks could cause our actual results to differ materially and adversely from those expressed in any forward-looking statement. We expressly disclaim any obligation to update any forward-looking statement.